{"id":324149,"date":"2023-07-20T11:11:59","date_gmt":"2023-07-20T03:11:59","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324149"},"modified":"2023-07-20T11:12:01","modified_gmt":"2023-07-20T03:12:01","slug":"stock-in-focus-manila-electric-co-meralco-mer-20-july-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-20-july-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 20 July 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>MER<\/td><\/tr>
Company Name<\/strong><\/td>Manila Electric Co. (Meralco)<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>20 July 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 377.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Considering MER\u2019s strong revenue growth and expected higher contribution from its power generation segment, we recommend to accumulate MER at lower prices as potential upside to our Target Price of P377.00 has narrowed to 7.4%.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

MER power sales up 3.4%<\/strong><\/p>\n\n\n\n

Ferdinand Geluz, Manila Electric Co.\u2019s (MER) Senior Vice President and Chief Commercial Officer for Customer Retail Services, disclosed to media that the distribution utility\u2019s sales volume in the first half grew by 3.4% to 24,458 GWh. The surge in demand was mainly driven by the commercial segment, which recorded a 10% jump in sales volume during the period due to the full face-to-face operations of businesses and school openings. Residential sales volume grew by a more modest 1% in H1, while industrial sales declined by 2%. Higher rates and end of refunds to drive revenues. Based on MER\u2019s disclosed rates for the months of April to June, we estimate that the portion of retail rates that are booked as MER\u2019s revenues went up by 1.7% QoQ. This increase is primarily driven by a 4.2% jump in generation charges due to heightened demand during the summer months. The portion that makes its way to MER\u2019s bottom line, namely the distribution charges, were also boosted by the completion of distribution rate true-up (DRTU) refunds in May.<\/p>\n\n\n\n

2Q 2023 could be one of MER\u2019s best quarters ever<\/strong><\/p>\n\n\n\n

Considering the strong demand for electricity during the summer months, we estimate MER to book around P11.5-Billion in distribution revenues this quarter and around P8.8-Billion in net income. Such a strong performance is expected for a quarter that typically has an outsized contribution of 27% to full-year revenues and 29% to full-year net income. This should bring MER\u2019s first half net income to P17.0 Billion, a 27.0% jump from last year\u2019s P13.4-Billion. Note, however, that MER\u2019s 1Q 2022 numbers were impacted by impairment charges from damages to Global Business Power Corp.\u2019s (GBPC) power plants caused by Typhoon Odette. <\/p>\n\n\n\n

Should our first half estimate materialize, this will represent 56.7% of our FY 2023 net income forecast for MER. The company is currently trading at 13.2x FY 2023 P\/E, which is well below its 5-year average P\/E of 15.4x. Considering MER\u2019s strong revenue growth and expected higher contribution from its power generation segment, we recommend to accumulate MER at lower prices as potential upside to our Target Price of P377.00.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>